-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ETPCr6lzkCe3N68w48mh/7FppvCx96iSSGxTQJs7FDoHCq8O3StxBwKugfVeNRCM mU7HhpUFTo8gU5PjSlBgZw== 0000897101-96-000971.txt : 19961115 0000897101-96-000971.hdr.sgml : 19961115 ACCESSION NUMBER: 0000897101-96-000971 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH ATLANTIC TECHNOLOGIES INC CENTRAL INDEX KEY: 0000706021 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED PLATE WORK (BOILER SHOPS) [3443] IRS NUMBER: 411390785 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-12768 FILM NUMBER: 96661644 BUSINESS ADDRESS: STREET 1: 8120 PENN AVE S STE 435 CITY: BLOOMINGTON STATE: MN ZIP: 55431 BUSINESS PHONE: 6128888553 MAIL ADDRESS: STREET 1: 8120 PENN AVE SOUTH STREET 2: STE 435 CITY: BLOOMINGTON STATE: MN ZIP: 55431 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] Quarterly Report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For quarterly period ended: September 30, 1996 or [ ] Transition report under Section 13 or l5(d) of the Exchange Act of 1934 For the transition period from _____ to _____ Commission File Number: 2-85984-C North Atlantic Technologies, Inc. (Exact name of small business issuer as specified in its charter) Minnesota 41-1390785 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 8120 Penn Avenue South, Suite 435, Bloomington, Minnesota 5543l (Address of principal executive offices) (Zip Code) Issuer's telephone number 612-888-8553 - ------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Check whether registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court. Yes __X__ No _____ State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date; 2,021,631 common shares as of September 30, 1996. Transitional small business disclosure format? Yes ____ No __X__ PART I - FINANCIAL INFORMATION ITEM I - FINANCIAL STATEMENTS
NORTH ATLANTIC TECHNOLOGIES, INC. BALANCE SHEETS (UNAUDITED) SUCCESSOR COMPANY PREDECESSOR COMPANY ----------------- ------------------- SEPTEMBER 30, DECEMBER 31, ASSETS 1996 1995 ----------------- ------------------- CURRENT ASSETS Cash and equivalents $ 95,821 $ 44,607 Trade accounts receivable, net of allowance for doubtful accounts of $339,440 at Sept 30, 1996 and at Dec 31, 1995 1,514,103 818,887 Other receivable 171,404 171,404 Inventories 262,990 145,356 Other current assets 39,646 29,029 ----------- ----------- Total current assets 2,083,964 1,209,283 PROPERTY AND EQUIPMENT Land 695,792 92,510 Buildings and leasehold improvements 692,441 692,441 Machinery and equipment 1,214,257 1,211,914 Office furniture and equipment 159,273 153,945 Automobiles 11,666 11,666 ----------- ----------- Totals 2,773,429 2,162,476 Less accumulated depreciation (1,152,609) (1,305,351) ----------- ----------- Net property and equipment 1,620,820 857,125 OTHER ASSETS Patent rights, less accumulated amortization of $5,000 95,000 Reorganization value in excess of amounts allocable to identifiable assets, less accumulated amortization of $20,960 399,944 Other 12,399 3,652 ----------- ----------- Total other assets 507,343 3,652 ----------- ----------- $ 4,212,127 $ 2,070,060 =========== =========== See notes to financial statements.
NORTH ATLANTIC TECHNOLOGIES, INC. BALANCE SHEETS (UNAUDITED) SUCCESSOR COMPANY PREDECESSOR COMPANY ----------------- ------------------- SEPTEMBER 30, DECEMBER 31, LIABILITIES AND EQUITY 1996 1995 ----------------- ------------------- CURRENT LIABILITIES Current maturities of long-term debt $ 932,793 $ 3,547,622 Trade accounts payable 1,149,936 878,422 Other accounts payable 393,428 393,428 Billings in excess of costs and estimated earnings on uncompleted contracts 585,374 477,893 Accrued liabilities: Taxes other than income 52,974 15,219 Warranty reserve 169,468 200,000 Compensation 77,710 42,198 Interest 13,578 170,378 Other 129,812 ---------- ----------- Total current liabilities 3,505,073 5,725,160 LONG-TERM DEBT, NET OF CURRENT MATURITIES Note payable to Bank 402,093 Mortgage note payable 473,004 Lease obligations 13,716 12,251 ----------- ----------- Total Long-Term Debt 888,813 12,251 Total Liabilities 4,393,886 5,737,411 STOCKHOLDER'S EQUITY (DEFICIT) Preferred stock, Series A Convertible, $.01 par value; authorized 22,000 shares, 21,600 shares issued under Plan of Reorganization 216 Common stock, no par value; authorized 5,000,000 shares; issued and outstanding 2,392,689 at December 31, 1995; shares canceled under Plan of Reorganization 3,047,804 Common stock, $.01 par value; authorized 5,000,000 shares, 2,546,689 shares issued under Plan of Reorganization 25,467 Retained (deficit) (207,442) (6,715,155) ----------- ----------- Total stockholders' (deficit) (181,759) (3,667,351) ----------- ----------- $ 4,212,127 $ 2,070,060 =========== =========== See notes to financial statements
NORTH ATLANTIC TECHNOLOGIES, INC. STATEMENTS OF OPERATIONS (UNAUDITED) SUCCESSOR COMPANY PREDECESSOR COMPANY ------------------------------- -------------------------------------------------- 3 MONTHS ENDED 6 MONTHS ENDED 3 MONTHS ENDED 3 MONTHS ENDED 9 MONTHS ENDED SEPT 30, 1996 SEPT 30, 1996 MARCH 31, 1996 SEPT 30, 1995 SEPT 30, 1995 -------------- -------------- -------------- -------------- -------------- DEBTOR-IN- POSSESSION REVENUES $ 959,303 $ 2,645,684 $ 1,394,512 $ 464,898 $ 3,217,217 COST OF REVENUES 863,452 1,931,924 883,617 429,105 2,796,119 ----------- ----------- ----------- ----------- ----------- Gross Profit 95,851 713,760 510,895 35,793 421,098 OPERATING COSTS 393,498 821,282 310,996 418,962 1,340,838 ----------- ----------- ----------- ----------- ----------- Operating (Loss) Income (297,647) (107,522) 199,899 (383,169) (919,740) OTHER INCOME (EXPENSE) Royalty and services income (8,289) 5,950 6,245 (14,830) (13,275) Interest expense (Contractural (65,156) (122,420) (82,372) (124,870) (345,235) interest for 3 months ended March 31, 1996 was $123,891) Rental and other income 6,525 16,550 10,350 10,950 49,849 Write-down of patent (184,505) (66,920) (99,920) (65,777) (128,750) (493,166) ----------- ----------- ----------- ----------- ----------- (LOSS) INCOME BEFORE REORGANIZATION ITEM (364,567) (207,442) 134,122 (511,919) (1,412,906) REORGANIZATION ITEM, PROFESSIONAL FEES 25,566 ----------- ----------- ----------- ----------- ----------- NET (LOSS) INCOME ($ 364,567) ($ 207,442) $ 108,556 ($ 511,919) ($1,412,906) =========== =========== =========== =========== =========== NET (LOSS) INCOME PER COMMON SHARE ($ .14) ($ .08) $ .04 ($ .21) ($ .59) =========== =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 2,546,689 2,546,689 3,015,766 2,392,689 2,392,689 =========== =========== =========== =========== =========== See notes to financial statements
NORTH ATLANTIC TECHNOLOGIES, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) SUCCESSOR COMPANY PREDECESSOR COMPANY ----------------- -------------------------------- 6 MONTHS ENDED 3 MONTHS ENDED 9 MONTHS ENDED SEPT 30, 1996 MARCH 31, 1996 SEPT 30, 1995 ----------------- -------------- -------------- DEBTOR-IN- POSSESSION CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 2,670,065 $ 777,708 $ 2,809,791 Cash paid to suppliers & employees (2,471,742) (1,021,749) (3,632,835) Interest, rent and royalties received 26,330 17,453 62,056 Interest paid (126,550) (58,616) (274,643) ----------- ----------- ----------- Net cash provided by (used in) operating activities 98,103 (285,204) (1,035,631) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (6,458) (1,213) (27,866) Proceeds from restricted cash 0 39,500 Additions of other assets (8,747) ----------- ----------- ----------- Net cash (used in) provided by investing activities (6,458) (9,960) 11,634 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt 700,000 300,000 1,800,000 Payments of long-term debt (739,916) (5,351) (791,271) ----------- ----------- ----------- Net cash (used in) provided by financing activities (39,916) 294,649 1,008,729 ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 51,729 (515) (15,268) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 44,092 44,607 41,384 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 95,821 $ 44,092 $ 26,116 ----------- ----------- ----------- RECONCILIATION OF NET (LOSS) INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net (loss) Income ($ 207,442) $ 108,556 ($1,412,906) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 115,893 39,191 321,879 Stock issued for compensation 4,500 2,250 Gain on disposal of equipment (400) Changes in assets and liabilities: Receivables (427,873) (267,343) (107,368) Inventories (113,532) (4,102) 44,424 Other current assets (18,722) 10,355 40,892 Accounts payable and accrued liabilities 32,254 431,433 (46,674) Net increase (decrease) in billings related to costs and estimated earnings on uncompleted contacts 713,025 (605,544) 124,522 ----------- ----------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 98,103 ($ 285,204) ($1,035,631) =========== =========== =========== See notes to financial statements.
NORTH ATLANTIC TECHNOLOGIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. On February 1, 1996 the Company filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code. The Plan of Reorganization was approved on April 19, 1996, and amended on May 7, 1996. The accompanying financial statements for the 6 months ended September 30, 1996 are presented as if the Plan of Reorganization was effective as of April 1, 1996. The Plan of Reorganization provided that: a) Holders of the Company's 12.5% Subordinated Convertible Debentures due in 1995 (the "Debentures") will be entitled to receive one share of common stock for each $1.50 of Debenture debt owed by the Company. In addition, each Debenture holder will be entitled to receive one share of convertible preferred stock at $0.01 par value for each $100 of Debenture debt of the Company, and b) Each existing stockholder will be issued one share of common stock in cancellation of three shares owned by the shareholder, effective for shareholders of record on May 21, 1996. c) $500,000 of the line of credit borrowings will be converted to a five-year note bearing interest at a rate of up to 12%, with the remainder, including an additional $200,000 in financing which become available upon approval of the Plan, being financed under a new line of credit at comparable rates with required monthly reductions of $25,000 commencing May 1, 1996. It has been subsequently agreed to defer reduction of the line of credit in $25,000 increments until August 1, 1996. d) All other general creditors claims are to be settled in full upon a schedule to be agreed upon between the Company and its creditors. Under the terms of the Plan of Reorganization, subject to the delivery of Debentures to the Company for cancellation, Debenture holders are entitled to receive up to 1,447,366 newly-issued common shares, and up to 21,600 newly-issued convertible preferred shares. As of September 30, 1996, the Company had issued 2,021,631 shares of common stock and 13,763 shares of convertible preferred stock in exchange for Debentures submitted to the Company for cancellation. The 3,292,689 shares of no par common stock outstanding as of May 21, 1996 have been canceled and replaced with 1,099,323 newly-issued common shares. The total outstanding common shares following the above common stock adjustments will be 2,546,689. If the adjustments occurred on January 1, 1996, supplemental earnings per share for the first quarter of 1996 would have been unchanged as reported at $.04. 2. Fresh Start Reporting Under the provisions of Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code", the Company was required to apply "fresh start" reporting since the reorganization value, as defined, was less than the total of all post-petition liabilities and pre-petition claims, and holders of voting shares immediately before confirmation of the Plan received less than fifty percent of the voting shares of the emerging entity. Under this concept, all assets and liabilities are restated to reflect the reorganization value of the reorganized entity, which approximates its fair value at the date of reorganization. The financial statements of the reorganized entity are referred to herein as the Successor Company and the financial statements of the Company up to the date the Plan was implemented are referred to herein as the Predecessor Company. To determine an estimate of its reorganization value, the Company utilized a combination of the estimated proceeds and recovery it would obtain from its assets and the value of its capital structure as perceived by the Company and others. Based upon these factors, the Company established a reorganization value (total assets less liabilities) of the reorganized entity of $25,683. The Company allocated the reorganization value to the net book value of tangible assets as follows: Land $603,282 Machinery and Equipment 268,759 Office Furniture and Equipment 13,107 Patent 100,000 -------- $985,148 ======== Under the provisions of Statement of Position 90-7, the difference between the reorganization value of the assets and the fair value assigned to specific tangible and identified intangible assets was reported as an intangible asset identified as "reorganization value in excess of amounts allocable to identified assets." This amount will be amortized over 10 years. In addition, the Accumulated Deficit of the Company was eliminated and its capital structure was recast in conformity with the approved Plan of Reorganization. As such, the Balance Sheet of the Company as of September 30, 1996 represents that of a Successor Company which, in effect, is a new entity with assets, liabilities and a capital structure having carrying values not entirely comparable with prior periods. The following table summarizes the adjustments required to record the reorganization of the Company and the issuance of various securities in connection with the implementation of the Plan. The presentation is presented as if the Plan of Reorganization was effective as of April 1, 1996.
CONVERTIBLE SUBORDINATED PRE- DEBT REVERSE SUCCESSOR DECESSOR DISCHARGE STOCK SPLIT COMPANY'S COMPANY AND RELATED FOR EXISTING REORGANIZED PRE- ISSUANCE OF COMMON "FRESH START" BALANCE CONFIRMATION CAPITAL STOCK SHAREHOLDERS REPORTING SHEET ------------ ------------- ------------ --------- ----- CURRENT ASSETS $1,733,549 $1,733,549 PROPERTY AND EQUIPMENT (NET) 819,147 $885,148 1,704,295 OTHER ASSETS: Patent 100,000 100,000 Reorganization value in excess of amounts allocable to identifiable --- 420,904 420,904 assets Other 12,399 12,399 ---------- ---------- ---------- ---------- ---------- $2,565,095 $1,406,052 $3,971,147 ========== ========== ========== ========== ========== LIABILITIES NOT SUBJECT TO COMPROMISE: Current liabilities $3,930,507 $3,930,507 Lease obligations (long-term) 14,957 14,957 ---------- ---------- ---------- ---------- ---------- 3,945,464 3,945,464 LIABILITIES SUBJECT TO COMPROMISE: Convertible Subordinated Debentures and related interest payable 2,169,426 (2,169,426) --- ---------- ---------- ---------- ---------- ---------- Total Liabilities 6,114,890 (2,169,426) 3,945,464 Liabilities STOCKHOLDERS' EQUITY (DEFICIT) Preferred Stock --- 216 216 Common Stock (no par) 3,056,804 (3,056,804) --- Common Stock ($.01 par) --- 14,474 10,993 25,467 Retained Earnings (Deficit) (6,606,599) 2,154,736 3,045,811 1,406,052 --- ---------- ---------- ---------- ---------- ---------- (3,549,795) 2,169,426 0 1,406,052 25,683 ---------- ---------- ---------- ---------- ---------- $2,565,095 $0 $0 $1,406,052 $3,971,147 ========== ========== ========== ========== ==========
3. The accompanying financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the periods presented have been made. The Company's financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Predecessor Company (see Note 2) incurred net losses for 1993, 1994 and 1995 and, as a result, financial resources have been strained. As of September 30, 1996, the Successor Company's current liabilities exceed current assets by $1,421,109. While the Company, through its Plan of Reorganization which was initially confirmed by the United States Bankruptcy Court on April 19, 1996 and amended on May 7, 1996, (See Note 1), has significantly reduced its debt commitments, the Successor Company's continuation as a going-concern is dependent on its ability to generate sufficient cash flow from operations, and obtain additional financing to meet its obligations on a timely basis. The Successor Company's business is currently dependent on large projects in the industrial sector. These projects involve long order cycles, and exact order placement dates are beyond the control of the Successor Company. While the Successor Company utilizes a progress billing procedure, there are periods of net cash outflows when cash flow is of concern. Both the Predecessor Company and the Successor Company have been able to manage normal operating cash flow through the use of internally generated funds and an established line of credit. 4. Earnings per share - when calculated on a fully diluted basis, per share amounts and average shares outstanding are identical to the amounts shown in the Statements of Operations. In January, 1996, 900,000 shares (300,000 on a post reverse split basis) of the Predecessor Company's common stock were issued at a market value of $.01 per share. The market value of the shares total $9,000 and is being charged to expense during 1996. 5. Preferred Stock - The Successor Company is required to issue up to 21,600 shares of convertible preferred stock, par value $.01 per share in connection with the discharge of the, and in exchange for, Debentures and related interest payable. Each preferred share is convertible, at the holder's option until June 1, 1999, and automatically after June 1, 1999, into one share of common stock. Each preferred share has a liquidation preference of $25 per share and may be redeemed at the Successor Company's option at any time prior to conversion into common stock, at $25 per share. 6. On July 10, 1996, the Successor Company was notified of a claim in the amount of $542,738, which the Company erroneously believed to have been extinguished in the Bankruptcy Court action. The Successor Company settled the claim for $6,500 in October, 1996 with no further action or liability on the part of the Successor Company. PART 1 - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On February 1, 1996, the Company filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code. As stated in Note 1 to the financial statements, the Plan of Reorganization was approved on April 19, 1996, and amended on May 7, 1996. The Plan of Reorganization provided that: 1. Holders of the Company's 12.5% Subordinated Convertible Debentures due in 1995 (the "Debentures") will be entitled to receive one share of common stock for each $1.50 of Debenture debt owed by the Company. In addition, each Debenture holder will be entitled to receive one share of convertible preferred stock at $0.01 par value for each $100 of Debenture debt of the Company, and 2. Each existing equity holder (of record as of May 21, 1996) will be issued one share of common stock in cancellation of three shares owned by the shareholder. 3. $500,000 of the line of credit borrowings will be converted to a five-year note bearing interest at a rate of up to 12%, with the remainder, including an additional $200,000 in financing which will become available upon approval of the plan, being financed under a new line of credit at comparable rates with required monthly reductions of $25,000 commencing May 1, 1996. It has been subsequently agreed to defer reduction of the line of credit in $25,000 increments until August 1, 1996. 4. All other general creditors claims will be settled in full upon a schedule to be agreed upon between the Company and its creditors. The accompanying financial statements for the period subsequent to March 31, 1996 are presented as if the Plan of Reorganization, which became effective subsequent to March 31, 1996 was effective on April 1, 1996 and are prepared on the basis of "fresh start" reporting as required by SOP 90-7. Under this concept, all assets and liabilities are restated to reflect the reorganization value of the reorganized entity, which approximates its fair value at the date of reorganization. The financial statements of the reorganized entity are referred to herein as the Successor Company and the financial statements of the Company up to the date the Plan was implemented are referred to herein as the Predecessor Company. To determine an estimate of its reorganizational value, the Company utilized a combination of the estimated proceeds and recovery it would obtain from its assets and the value of its capital structure as perceived by the Company and others. Based upon these factors, the Company established a reorganization value (total assets less liabilities) of the reorganized entity of $25,683. As more fully described in Note 2 to the Financial Statements, the Accumulated Deficit of the Predecessor Company was eliminated and its capital structure was recast in conformity with the Plan of Reorganization. As such, the Balance Sheet of the Company as of September 30, 1996 represents that of a Successor Company which, in effect, is a new entity with assets and liabilities having carrying values not entirely comparable with prior periods. The following analysis compares the Successor Company (effective April 1, 1996) with the results of the Predecessor Company. With the exception of the Balance Sheet at September 30, 1996, which utilizes "Fresh Start" reporting, the comparison for the Statements of Operations for 1996 (Successor Company) and 1995 (Predecessor Company) are comparable except for interest expenses related to the convertible debentures and professional fees incurred in connection with the bankruptcy. GOING CONCERN The Company's financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Predecessor Company (see Note 2) incurred net losses for 1993, 1994 and 1995 and, as a result, financial resources have been strained. As of September 30, 1996, the Successor Company's current liabilities exceed current assets by $1,421,109. While the Company, through its Plan of Reorganization which was initially confirmed by the United States Bankruptcy Court on April 19, 1996 and amended on May 7, 1996, (See Note 1), has significantly reduced its debt commitments, the Successor Company's continuation as a going-concern is dependent on its ability to generate sufficient cash flow from operations, and obtain additional financing to meet its obligations on a timely basis. The Successor Company's business is currently dependent on large projects in the industrial sector. These projects involve long order cycles, and exact order placement dates are beyond the control of the Successor Company. While the Successor Company utilizes a progress billing procedure, there are periods of net cash outflows when cash flow is of concern. Both the Predecessor Company and the Successor Company have been able to manage normal operating cash flow through the use of internally generated funds and an established line of credit. RESULTS OF OPERATIONS Revenues of $959,303 for the 3 months ended September 30, 1996 of the Successor Company reflect an increase of 106% from the $464,898 in revenues reported for the comparable 3 month period in 1995. 1996 revenues reflected increased demand compared to 1995 for the Company's product. Gross profit for the 3 months ended September 30, 1996 of the Successor Company improved marginally to 10% from 8% for the same period in 1995. Gross profit in 1996 reflects a charge to cost of revenues in the amount of $135,000 representing warranty costs on a previously completed project. This charge represents 14% of revenues. Revenues of the Successor Company decreased for the 3 months ended September 30, 1996 from the 3 months ended June 30, 1996 by $727,078 or 43%. The decrease is primarily attributable to the production concentration of a longer term project that is expected to be shipped at the end of 1996 and the beginning of 1997. Operating costs as a percent of revenues for the 3 months ended September 30, 1996 of the Successor Company were 41%, and 90% in 1995 for the same period. However, total operating costs for both years were relatively unchanged.. Interest expense for the 3 months ended September 30, 1996 of the Successor Company was $65,156, and $124,870 in 1995 for the same period. The change of $59,714 is primarily accounted for by interest expense on subordinated debentures which was discharged pursuant to the approved Plan of Reorganization. Operating costs and interest expense of the Successor Company for the 3 months ended September 30, 1996 and for the 3 months ended June 30, 1996 remained relatively unchanged. LIQUIDITY AND CAPITAL RESOURCES The working capital deficit position of the Successor Company was ($1,421,109) at September 30, 1996 which was an improvement of $775,849 from April 1, 1996, this was the result of the reclassification of a portion of the mortgage payable to long term in the amount of approximately $490,000, a reclassification of $500,000 of the line of credit to a term loan ($90,000 of which is considered current), and an increase in the line of credit in the amount of $200,000. As of September 30, 1996, the Company had approximately $100,000 available under the line of credit that has a maximum available in the amount of $1,025,000. There are no assurances that any further funding will be available from current sources, or that the current sources (when renewed) will be sufficient. If these resources are insufficient, other sources of funding would need to be developed. There are also no assurances that such funding would be available or that the terms of such funding would be on terms acceptable to the Company. The Company believes that the conversion of the Debentures into equity and the cancellation of the Debenture interest, and the improvement of demand in the global marketplace for its products will strengthen its position as a going concern. However, the Company's ability to continue as a going concern is subject to a number of risks and uncertainties including, among others, the Company's ability to generate sufficient funds from operations and the overall demand for the Company's product, which is subject to general economic, competitive and industry - specific conditions. PART 2 - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. Bruce A. Watson, President, CEO and CFO of the Company resigned his position as an Officer and Director of the Company effective October 15, 1996. Effective October 16, 1996 Allen R. Karson was elected as President, CEO and CFO of the Company. Item 6. Exhibits and Reports on form 8-K. (a) Exhibits. 27 Financial Data Schedule (b) Reports on Form 8-K None SIGNATURE Dated: November 11, 1996 In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. North Atlantic Technologies, Inc. /s/ Allen R. Karson November 11, 1996 - ------------------- Allen R. Karson Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and principal accounting officer). NORTH ATLANTIC TECHNOLOGIES, INC. EXHIBIT 27 FINANCIAL DATA SCHEDULE EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1996 SEP-30-1996 95,821 0 1,682,737 339,440 262,990 1,829,269 2,773,429 1,152,609 3,957,432 3,250,378 0 0 216 25,467 (207,442) 3,957,432 2,645,684 2,645,684 1,931,924 821,282 (22,500) 0 122,420 (207,442) 0 (207,442) 0 0 0 (207,442) (.08) (.08)
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